RBI Allows Residents To Open Foreign Currency Accounts At GIFT IFSC: Money Can Be Used For These Purposes

On July 10, 2024, the Reserve Bank of India (RBI) issued a circular that expands the scope of norms related to remittances to International Financial Services Centres (IFSCs) under the Liberalised Remittance Scheme (LRS).

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What Has Changed?

Under this new circular, resident Indians are now permitted to open foreign currency accounts (FCA) in dollars in a bank account at GIFT IFSC under the liberalized remittances scheme (LRS). This foreign currency can be used for sending gifts to friends abroad, maintenance of relatives abroad, overseas portfolio investments, buying property abroad, purchasing insurance, making fixed deposits, paying education loans, and funding overseas travel.

This is especially beneficial for high net-worth individuals as it provides protection against inflation in India and the depreciation of local currency against the US dollar. Residents can invest outside India through the FCA account, within the LRS limit of USD 250,000 per year.

Previously, remittances under LRS to IFSCs could only be made for making investments in IFSCs in securities (except those issued by entities outside IFSC) and payment of fees at foreign universities.

Says Viram Shah, Co-founder & CEO of Vested Finance, "This move will provide Indian residents with increased flexibility for global investing and spending."

"By opening accounts in GIFT City, Indian individuals will be able to keep their funds within the Indian financial system while still participating in global financial activities. This development is a positive step, especially for High Net Worth Individuals (HNIs) who currently tend to open accounts in financial hubs like Dubai and Singapore. Furthermore, this announcement is viewed as a progressive measure towards achieving full convertibility of the Indian rupee and establishing it as a global currency."

GIFT-IFSC

GIFT City (Gujarat International Finance Tec-City) houses India's maiden International Financial Services Centre (IFSC) located in Gandhinagar, Gujarat. Its aim is to bring back India-related financial services and transactions that are currently offshore. The regulatory environment in GIFT IFSC allows for tax exemptions, making companies based there more competitive. In January 2024, the Center approved public Indian companies to directly list their securities on the international exchanges at GIFT-IFSC.